HARTFORD — A tax plan developed by Democrats in the legislature would expand or increase the sales tax for an estimated 20,000 businesses, according to state statistics.

An analysis by the state tax department shows that placing the 6.35 percent sales tax for the first time on 25 services would affect nearly 1,000 accounting firms, 457 engineering firms, 311 veterinarians and 183 architectural firms.

The sales tax would also be charged for the first time on dry cleaning and laundry services.

For Gail Reiner, whose family has operated Mayflower Laundry & Drycleaning Co. in Hartford for more than 80 years, the new sales tax does not make sense. She says it would hurt an industry with more than 6,000 workers already hit hard by the recession. She has submitted detailed testimony to Republican legislators, who will hold a public hearing on the tax changes Monday at 1:30 p.m. in Room 1E of the Legislative Office Building at the Capitol.

"This measure would severely impact an already distressed industry, comprised mostly of small business owners and blue-collar workers,'' Reiner said. "The industry has endured severe hardships over the last several years, and we have seen a distressing amount of businesses closing their doors – and this measure could force even more businesses to fail, leading to an even greater employment problem.''

HARTFORD — Republican leaders in the legislature will hold a public hearing on the finance committee's plan to raise taxes on the wealthy and institute a sweeping expansion of the state sales tax.

GOP leaders say that people have not had a chance to comment on the specifics of the tax package approved...

HARTFORD — Republican leaders in the legislature will hold a public hearing on the finance committee's plan to raise taxes on the wealthy and institute a sweeping expansion of the state sales tax.

GOP leaders say that people have not had a chance to comment on the specifics of the tax package approved...

(DANIELA ALTIMARI)

Rep. Jeffrey Berger, D-Waterbury, the co-chairman of the tax-writing finance committee, defended the proposal, which was written by Democratic legislators and endorsed by Sen. Martin Looney, D-New Haven, Senate president. Berger said that Republicans must look at the Democratic proposal in its entirety, which includes cutting the car tax in about half the towns in Connecticut.

The car tax would drop the most in cities with high mill rates like Hartford, New Britain, Bridgeport and New Haven. In Waterbury, the tax on a 2013 Honda Accord with a market value of $18,000 – which was used by the legislature's nonpartisan fiscal office as an example – would drop nearly in half to $370 a year, down from the current $734.

Berger rejected an example by Senate Republican leader Len Fasano of North Haven that, under the Democratic plan, a homeowner could end up paying sales taxes on four different services when building a home, including architectural and engineering services.

"You'll pay one fee to the general contractor to build the house,'' Berger said. "That doesn't mean that every house you build you're going to have all these fees on it. They're spinning it any way they want to spin it.''

The largest number of businesses affected under the Democratic plan would be 4,867 computer and data processing service providers, according to the Department of Revenue Services. Those firms currently pay a sales tax of 1 percent, but the total would be increased to 6.35 percent under a plan by the finance committee. The sales tax would also be applied on nearly 4,100 management, scientific and technical consulting firms, along with nearly 2,500 specialized design firms, including those involved in graphic and fashion design.

State tax officials said the number of businesses affected was calculated based on codes provided by the businesses on their confidential taxes, and they conceded that the overall numbers could be undercounted if the codes were not entered properly. For example, state officials say that 143 dry cleaning companies would be affected by the tax plan, but Reiner says there are more than 1,000 of those businesses statewide.

Although the finance committee approved the plan, the final package is not settled. Legislative leaders and Gov. Dannel P. Malloy will be debating the final shape of the tax and spending plans in the two-year, $40 billion budget in the coming weeks as they head toward a scheduled adjournment date of June 3.

Although Republicans called for deep spending cuts and no tax increases, the Democrats called for expanding the sales tax by a net increase of $372 million in a $1.1 billion tax package for the fiscal year that starts July 1.

Malloy has not endorsed the plan developed by the Democratic legislators on the finance committee but has also avoided explicitly stating that he would veto the package. He has said repeatedly that the finance committee plan does not help the middle class.

"He's not going as far as a veto threat as he doesn't want to pour gasoline on the fire, but he's been very clear that he doesn't think either alternative budget makes the tough choices necessary,'' said Mark Bergman, Malloy's communications director. "The Republican plan isn't serious because they don't have a realistic way of paying for what they promised, and the Democratic alternative adds too much of a burden on the middle class and working families.''

Democrats have hailed their proposal.

"I don't think there's a single company that's not impacted by this, including my hairdresser, who will have to pay a higher fee for her accounting services,'' said Bonnie Stewart, general counsel of the 10,000-member Connecticut Business and Industry Association. "Most people are talking about it as the architects are getting hit or the accountants are getting hit, but so are every single one of their customers.''

Stewart says she hopes that consumers and businesses will not jump across state borders in order to avoid the 6.35 percent sales tax on everything from dry cleaning to accounting services. She fears that the ripple effect will be deep, adding that the state might collect even more money than projected as state officials learn the depth of the impact.

"Most people have accountants if you have any type of business,'' she said, adding that companies and individuals will now "pay taxes to pay your taxes.''

Engineers also are not happy, according to Paul W. Brady, executive director of the American Council of Engineering Companies of Connecticut. The council represents more than 90 engineering firms and more than 250 licensed professional engineers.

"The tax would be very complicated to administer for the state and taxpayers, as the multi-state nature of customers and service providers often makes it difficult to determine where, when, and how the services take place,'' Brady said in testimony sent to legislators. "In fact, when Connecticut taxed engineering services about 25 years ago, the Department of Revenue Services recommended that the tax be eliminated in part because of the complexity of administering the tax.''

Because no public hearing was held on some of the specific details in the Democratic plan, Republican legislators are holding the forum to get feedback from business owners and consumers about the potential affect on the economy.

More than 3,600 people have signed a Republican petition against tax increases, and more than 440 have submitted testimony for Monday's hearing. The website address of the online petition, at http://www.nonewcttaxes.com, defaults to a website maintained by senate Republicans in Connecticut, ctsenaterepublicans.com.

Berger said of Monday's hearing: "The Republicans, instead of having a public hearing on our budget, should have a public hearing on their own budget.''

But House Republican leader Themis Klarides responded, "That's a diversionary tactic if I ever heard one.''

Klarides and others say the overall package has too much spending, which prompted too much in taxes to pay for it. As such, she says, both the spending and taxes need to be reduced.

Berger, though, said that Democrats are willing to compromise with Malloy on the final package, but he warned that removing certain tax increases would cause a hole in the budget that needs to be filled.

"Is there going to be debate and discussion? Sure, there is,'' Berger said. "I think there's some flexibility in the document. But if you pull one way, it pulls the other. If you take veterinarians out, you have to make it up somewhere else. If you take dry cleaners out, you have to make it up somewhere else.''